on household consumption will be included in the dynamic microsimulation to approximate micro level economic effects of SPI over time. Figure 4 shows the distribution of household consumption per capita by quintiles and regions. Figures indicate median values, and 50% confidence intervals, of household consumption per capita per month. Upper ends are above USD 180 for the fifth quintile and for all regions. At the national level the median is USD 59. The ratio between the richest 20% (quintile 5) and the poorest 20% (quintile 1) is 4.2, and between Phnom Penh and other rural areas 1.9. Figure 4: Per capita household consumption, per month, by quintile and region (2009) USD (Phnom Penh prices)
USD (Phnom Penh prices)
180
180
160
160
140
140
134
120
120 105
100 60
60
80 54
46
40
100 83
81
80
59 60
40
32
20
20
0
0 Q1
Q2
Q3
Q4
Food Poverty Line
Q5
Phnom Other Other Total Penh Urban Rural Total Poverty Line
Note: Household consumption and poverty lines follow the “updated” methodology (Box 1) Source: Own calculations based on the CSES 2009
Jacob Mincer in his seminal work of 1974, states that the logarithm of wage is a linear function of schooling and quadratic for experience. However, this formulation assumes that the return on education is constant for all levels of education. New formulations have been developed relaxing this assumption and providing evidence about returns at different levels of education (e.g. Schady, 2000; Heckman et al, 2003). Following Schady (2000) a function to estimate the return of education can be defined as:
ln Wi 1Ei 2 Ei2 E Si Ni i
(Equation 3)
where, i refers to individuals, Wi indicates wages, Ei is the number of completed years of experience, S i refers to level of schooling (i.e. number of completed years of education) or dummy
variables for the last year of education achieved, N i includes observable characteristics at the individual level (Table 42 in Annex 3), and i is the error term, assumed to be normally distributed with mean zero, , 1 2 E are parameters to be estimated. , , ,
53